Review of Direct or Indirect Access Complaints

A firm denied access to a displayed quotation has a route to FINRA that runs on very short clocks. The route has two levels, and the practical exam point is what happens to the officer's order while the appeal is pending.

Who May Complain, and How?

A direct or indirect access complaint is a complaint against an ADF trading center alleging a denial or limitation of access in contravention of the ADF quote and order access rule or the federal securities laws.

Any registered broker-dealer that wishes to file one submits a written complaint stating the pertinent facts that constitute the grounds for the complaint. It goes via facsimile, e-mail, personal delivery, courier or overnight mail to FINRA Market Operations, and the complainant simultaneously serves the ADF trading center by the same means.

Officers of FINRA designated by the Chief Executive Officer of FINRA have the authority to review and make a determination on such complaints.

Exam Tip: Gotchas

• The complainant serves the trading center itself, not only FINRA. Service is simultaneous and by the same means the complaint used.
• Any registered broker-dealer may file. The right does not depend on being a FINRA member or an ADF participant.

What Can the Reviewing Officer Order?

Based on a review of the complaint and such investigation as the officer, in his or her sole discretion, may decide to conduct, the officer shall promptly determine whether there has been a denial of access by the ADF trading center.

Where the officer determines that there has been a denial of access in contravention of the ADF quote and order access rule or the federal securities laws, two things follow.

• The officer shall direct the ADF trading center to provide access to its ADF quotes.
• The officer may limit that party's participation in the ADF if it does not comply promptly with the directive, including by withdrawing the trading center's quotations from the ADF until access is provided.

FINRA provides the parties written notification of the determination by the close of business following the day the determination is rendered. The determination goes to the facsimile number listed in the parties' contact questionnaire submitted to FINRA under its By-Laws, or to another contact a party specifically designates.

The determination, and any directive to provide access or action to limit participation, is effective when issued or as specified, and remains in effect during any review or appeal. It does not constitute an estoppel as to FINRA and does not bind FINRA in any subsequent administrative, civil or disciplinary proceeding.

Exam Tip: Gotchas

• Directing access is mandatory and limiting participation is not. The officer shall direct access where the denial contravenes the ADF quote and order access rule or the federal securities laws, and may limit participation only where the firm does not comply promptly.
• An appeal here does not stay anything. The determination remains in effect during any review or appeal, which is the opposite of the system outage track, where an appeal operates as a stay.
• Whether to investigate at all is the officer's sole discretion. The rule requires a prompt determination, not a particular inquiry.

How Does a Party Appeal the Determination?

Any registered broker-dealer, including an ADF trading center, that seeks review submits a written appeal setting forth the grounds for that review, via facsimile, e-mail, personal delivery, courier or overnight mail, to FINRA, and serves it by the same means on the opposite party.

The deadline is the close of the next business day after receipt of the written determination. A written appeal not served on both FINRA and the opposite party by that time will not qualify for further administrative consideration, without prejudice to a party's right to submit the dispute to arbitration or another adjudicatory forum.

Once a written appeal has been received, two twenty-four-hour windows run in sequence.

Both of those submissions travel via facsimile, personal delivery, courier or overnight mail.

If the party seeking review fails to serve the opposite party any written information the two twenty-four-hour windows require, that party's written complaint will not qualify for further administrative consideration, again without prejudice to arbitration or another adjudicatory forum.

Exam Tip: Gotchas

• The second twenty-four-hour window starts on receipt, not on the appeal. The responding party's clock begins after the supporting information arrives.
• The appeal may go by e-mail while the supporting information may not. The rule names five means for the complaint and the appeal, and four for the information exchange.
• Missing a service step ends the administrative route only. The complaint drops out without prejudice to arbitration or another adjudicatory forum.

What Information Must a Firm Provide During the Review?

Each registered broker-dealer, and any person associated with a registered broker-dealer, involved in the review shall provide FINRA with any information it requests to resolve the matter on a timely basis, notwithstanding the time parameters in the appeal procedure.

If a registered broker-dealer does not provide requested information in a timely manner, FINRA may, in its discretion, consider the matter based upon the information provided.

Where the broker-dealer or associated person is a member or a person associated with a member, failure to provide requested information can constitute a violation of FINRA rules.

All requests for information under the rule are sent by the specified means to a receiving location that, from time to time, may be designated by FINRA.

Exam Tip: Gotchas

• The information duty overrides the appeal timetable. The rule says notwithstanding those time parameters, so a firm cannot point to a closed window to withhold information.
• Silence has two separate consequences. FINRA may decide on what it has, and a member's failure can itself be a rule violation.

Who Hears the Appeal, and What Can It Do?

If a party has applied for review and the procedural requirements of the appeal paragraph have been satisfied, the determination is reviewed and a decision rendered by a three-member subcommittee comprised of current or former industry members of FINRA's Market Regulation Committee.

Upon consideration of the record, and after such hearings as it may in its discretion order, the subcommittee shall affirm or reverse the officer's determination, in accordance with the requirements the ADF quote and order access rule sets.

The subcommittee provides the parties written notification of its determination by the close of business following the day the determination is rendered. That determination does not prejudice the rights of a party to submit the dispute to arbitration or another adjudicatory forum.

The subcommittee's determination, including affirmation of any directive or action the officer rendered, is effective when issued or as specified, constitutes final FINRA action, and remains in effect during any review or appeal. It does not constitute an estoppel as to FINRA and does not bind FINRA in any subsequent administrative, civil or disciplinary proceeding.

Exam Tip: Gotchas

• Review is conditional on the procedure being satisfied. A party that applied for review but missed a service step does not reach the subcommittee.
• A hearing is discretionary. The subcommittee decides on the record, after such hearings as it may in its discretion order.
• The subcommittee has two outcomes, not three. It affirms or reverses; the rule gives it no power to modify the officer's determination.

What Should You Check on Exam Day?

• Confirm the determination stays in effect during any review or appeal, since this track has no stay.
• Separate the mandatory directive to provide access from the discretionary limit on ADF participation.
• Run the two twenty-four-hour windows in order, with the second starting on receipt of the first party's information.
• Check the delivery means, because the complaint and the appeal may go by e-mail and the information exchange may not.
• Confirm the subcommittee is reached only where the procedural requirements of the appeal were satisfied.